On January 12, the Department of Justice announced a settlement with City National Bank of Los Angeles for “refusing to underwrite mortgages in predominantly Black and Latino communities.”
The $31 million dollar settlement requires the bank to:
- Invest at least $29.5 million in a loan subsidy fund for residents of majority-Black and Hispanic neighborhoods in Los Angeles County. (We note our work on an investment vehicle that deals with homelessness and another that deals with HIV/AIDS. See: https://www.impactinvesting.online/2018/11/william-michael-cunningham-on-impact.html and The opening of Brenda House Women’s Shelter https://www.prlog.org/12708015-william-michael-cunningham-to-speak-at-the-opening-of-brenda-house-womens-shelter.html);
- Spend at least $500,000 for advertising and outreach targeted toward the residents of these neighborhoods;
- Spend at least $500,000 for a consumer financial education program to help increase access to credit for residents;
- Spend at least $750,000 for the development of community partnerships to provide services that increase access to residential mortgage credit.
- Open one new branch in a majority-Black and Hispanic neighborhood; Conduct a Community Credit Needs Assessment.
Given the needs in the community and the number of regulations and laws that ostensibly prohibit this type of behavior, $31 million dollars is far lower than it should be.
(The settlement may actually increase gentrification since you don’t have to be Black to get a mortgage loan subsidy, just apply for a mortgage loan in a Black neighborhood.)
We noted in our Amicus Brief in CITY OF OAKLAND, v. WELLS FARGO & COMPANY, et. al., No. 19-15169, damages totaled $12.5 billion.
(To review our Amicus Brief, see: https://drive.google.com/file/d/18e9hzYxJ9PnN2FFCk8f0MvBm7h_2TtI8/view?usp=sharing
While City National is much smaller than Wells, fines at both banks confirm that the ratio of penalties to damage caused is consistently lower than appropriate.
Still, Justice has been aggressively investigating and fining discriminatory financial institutions “as part of the Department’s nationwide Combating Redlining Initiative that Attorney General Merrick B. Garland launched in October 2021,” a very good sign. They have found this a “target-rich” environment.
While the fine represents
the largest redlining settlement in DOJ history. $31 million may not be the final number. We expect other financial regulators like the Federal Reserve, the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency, to penalize the institution.We encourage anyone affected by this institution to contact the US Department of Justice. Additional information about the section’s fair lending enforcement can be found at www.justice.gov/fairhousing. Individuals may report lending discrimination by calling the Justice Department’s housing discrimination tip line at 1-833-591-0291, or submitting a report online.